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IN THE COURT OF APPEAL MALAYSIA AT PUTRAJAYA

(Appellate Jurisdiction)

CIVIL APPEAL NO. B-02(NCVC)(A)-2173-11/2016

BETWEEN

1. THYE SENG & COMPANY SDN BHD 2. NIRWANA JUARA SDN BHD 3. SIAN AID CREDIT DEVELOPMENT SDN BHD 4. UNI-FORTUNE SDN BHD 5. LANYANG INDUSTRIALS SDN BHD …….. APPELLANTS

AND

1. UNIVERSAL TRUSTEE (MALAYSIA) BERHAD 2. GULA PERAK BERHAD (IN LIQUIDATION)….. RESPONDENTS

(In The High Court Malaya At Shah Alam

Originating Summons No. 24 NCVC-102-04/2016

Between

1. THYE SENG & COMPANY SDN BHD 2. NIRWANA JUARA SDN BHD 3. SIAN AID CREDIT DEVELOPMENT SDN BHD 4. UNI-FORTUNE SDN BHD 5. LANYANG INDUSTRIALS SDN BHD …….. PLAINTIFFS

And

1. UNIVERSAL TRUSTEE (MALAYSIA) BERHAD 2. GULA PERAK BERHAD (IN LIQUIDATION) 3. CIMB BANK BERHAD …….. . DEFENDANTS)

2

CORAM

1. ROHANA BINTI YUSOF, JCA

2. VERNON ONG LAM KIAT, JCA

3. YEOH WEE SIAM, J

JUDGMENT

INTRODUCTION

[1] This is an Appeal against the decision of the learned Judicial

Commissioner (“learned JC”) in the Shah Alam High Court, dated

25.10.2016, in dismissing the Originating Summons No. 24NCVC-102-

04/2016 filed by the Appellants (“OS 102”).

OS 102:

[2] In enclosure 1 of OS 102, the Appellants sought the following

Orders:

‘1. Satu deklarasi bahawa Defendan Pertama tidak mempunyai apa-apa

kepentingan terhadap lot-lot industri yang berikut yang dimiliki oleh

Plaintif-Plaintif:-

(i) Lot 237, Lot 223 dan Lot 264 yang dimiliki oleh Plaintif Pertama;

(ii) Lot 253 dan Lot 254 yang dimiliki oleh Plaintif Ke-2;

(iii) Lot 255 ke Lot 262 yang dimiliki oleh Plaintif Ke-3;

(iv) Lot 277 ke Lot 281 yang dimiliki oleh Plaintif Ke-4; dan

(v) Lot 282 ke Lot 288 yang dimiliki oleh Plaintif Ke-5.

(secara kolektifnya dirujuk sebagai “25 Unit tersebut”);

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2. Satu deklarasi bahawa Defendan Pertama telah melanggar dan/atau

memungkiri akujanji yang telah diberikan olehnya melalui surat

bertarikh 25.8.2004 bahawa Defendan Pertama sama sekali tidak

mempunyai apa-apa kepentingan terhadap 25 Unit tersebut dan tidak

akan memasukkan 25 Unit tersebut dalam sekiranya prosiding

perampasan tanah dimulakan terhadap Lot 24 dan Lot 458

(“Penolakan dan Akujanji”);

3. Satu deklarasi bahawa Defendan Pertama tidak berhak untuk

melelongkan Lot 23 (sic) dan Lot 458 dan/atau menguatkuasakan

satu gadaian melalui Perserahan No.: 18153/2003 yang telah

didaftarkan pada 2.4.2003 (“Gadaian”) tanpa mengemukakan

Penolakan dan Akujanji dan/atau mengecualikan 25 Unit tersebut

daripada tindakan gadaian;

4. Satu deklarasai bahawa Gadaian dan/atau mana-mana kepentingan

dan hak-hak yang diberikan kepada Defendan Pertama berdasarkan

Gadaian bukan tidak boleh disangkal di dalam maksud Seksyen

340(2) Kanun Tanah Negara 1965;

5. Satu deklarasi bahawa Gadaian tersebut adalah oleh itu, cacat,

terbatal dan/atau tidak sah;

7. Kos permohonan ini akan ditanggung oleh Defendan Pertama; dan

8. Apa-apa relif selanjutnya atau lain yang dianggap sesuai dan wajar

oleh Mahkamah yang mulia ini untuk diberikan.’.

BACKGROUND FACTS

[3] The Common Chronology Of Facts filed for the Hearing on

17.5.2017 before us sets out the detailed background facts leading to this

Appeal.

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[4] Briefly, the facts regarding the dispute in OS 102 can be summed up

as follows;

[5] The 2nd Respondent (or “GPB”) is the owner of 6 pieces of lands

(“the Lands”), including Lot 24 and Lot 458. Prayers 1, 2, and 3 of OS

102 are only concerning the 25 Units of industrial lots claimed by the

Appellants to be located on Lot 24 and Lot 458, but not concerning the

other 4 lands under the charge registered in favour of the 1st

Respondent.

[6] Prior to the involvement of the 1st Respondent in this matter, the

Lands had previously been charged to Aseambankers Malaysia Berhad

(“Aseambankers”) (“Aseambankers’ Charge”). On 14.5.1999,

Aseambankers had issued a letter to 8 other financial institutions

disclaiming their rights over the Lands (“Aseambankers Disclaimer”)

[Common Core Bundle (“CCB”) Tab 3]. Aseambankers’ Charge has

been discharged on 27.12.2007 (CCB Tab 12).

[7] The Appellants alleged that from 1995 to 1996, they had entered into

several Sale and Purchase Agreements (“SPAs”) with the 2nd

Respondent to purchase, amongst others, the 25 Units of factory lots

located on Lot 458 (“25 Units”). None of the 25 Units are located in Lot

24. However, the Appellants contended that Lot 458 cannot be viewed

independently from Lot 24 since all the units (including the 25 Units) in

Lot 458 depend on a sewerage plant in Lot 24 for sewerage services.

This is recognised under Clause 7 of the SPAs.

[8] After the Aseambankers’ Charge was discharged, the 2nd

Respondent charged 2 Master titles of the Lands, i.e. for Lot 24 and Lot

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458, to the 1st Respondent under Presentation No. 18153/2003

(“Charge”) to secure facilities of Redeemable Convertible Secured Notes

2002/2007 (“RCSN”) for the benefit of the 2nd Respondent. The Charge

for the 1st Respondent was registered on 2.4.2003 (Affidavit in Support

of 1st Plaintiff in CCB Vol 2/2 pg 84 paragraph 4).

[9] The 2nd Respondent subsequently defaulted on the facilities

granted by the 1st Respondent. As at 22.4.2008, the 2nd Respondent

owed the 1st Respondent a sum of RM327,472,217.14. The 1st

Respondent, as the registered chargee, thereafter commenced legal

proceedings against the 2nd Respondent to enforce the Charge to

recover the outstanding amounts.

[10] On 1.3.2013, the 2nd Respondent was wound up.

[11] On 6.2.2014, the 1st Respondent filed an Application by way of

Originating Summons No. 24FC-119-02/2014 in the Shah Alam High

Court (“Foreclosure Proceedings”) to enforce the Charge.

[12] 12 years have passed since the registration of the Charge, and about

6 years after the declaration of default by the 2nd Respondent, on

17.3.2014 the 1st Respondent successfully obtained an Order for Sale of

the Lands. The 1st Respondent then proceeded to apply for a Summons

for Directions (“SFD”) on the sale of the Lands. The Lands were set for

auction to be sold separately on 29.9.2015. However, other third parties

have since made numerous applications to intervene and/or challenge

the Foreclosure or SFD proceedings.

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[13] On 29.4.2016, the Appellants filed this OS 102 claiming that they are

bona fide purchasers of the 25 Units, all located at BB Techno-Industrial

Park, Mukim Batang Berjuntai (allegedly located on Lot 24 and Lot 458),

and sought, inter alia, declaratory reliefs to the effect that the Charge

registered in favour of the 1st Respondent is defective. The factory lots

allegedly owned by the Appellants are as follows:

1st Appellant – Lot 237, 223 and 264;

2nd Appellant – Lot 253 and 254;

3rd Appellant – Lot 255 – 262;

4th Appellant – Lot 277 – 281; and

5th Appellant – Lot 282 -288

(collectively referred to as the “25 Units”).

[14] According to the Appellants, the rights and title to the 25 Units were

assigned to Southern Bank Berhad [now known as CIMB Bank Berhad

(“CIMB”)] by the Appellants as security for their respective loan facilities.

[15] After the various interventions by third parties had failed, the 1st

Respondent filed a fresh SFD. Lot 24 was then set to be auctioned off on

5.5.2016, while Lot 458 was set for auction on 21.6.2016.

[16] However, on 3.5.2016, pending the Hearing and disposal of the OS

102 Application herein, the Appellants filed an Application for an interim

injunction in the Shah Alam High Court to restrain the 1st Respondent

from proceeding or continuing with its Foreclosure Proceedings or

auctions for Lot 24 and Lot 458. The basis for the Appellants’ Application

was that by way of its letter dated 25.8.2004 to CIMB, the 1st Respondent

had disclaimed all rights, interest and title to the 25 Units and had

undertaken to exclude the same from any foreclosure proceedings

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commenced or instituted pursuant to the Charge (“UTB Disclaimer letter”

or “UTB Disclaimer”).

[17] The 1st Respondent alleged that before this, it did not have any

knowledge of the UTB Disclaimer. Upon discovery of the UTB Disclaimer

letter, the 1st Respondent undertook a Verification Exercise, and

conducted an investigation to ascertain the exact location of the 25 Units,

and whether they are situated in Lot 24 or Lot 458, or in both. The auction

dates fixed for Lot 24 and Lot 458 were adjourned or vacated.

[18] Upon completion of the Verification Exercise, the 1st Respondent

confirmed that the 25 Units are located on Lot 458 only, and not on Lot

24. The 1st Respondent contended that as a matter of prudence, and

pending disposal of this Appeal, they have instructed their Solicitors to

exclude the 25 Units built on Lot 458, allegedly owned by the Appellants,

from execution or the Foreclosure Proceedings.

[19] On 25.10.2016, the High Court dismissed the Appellants’ Application

in OS 102 with costs.

[20] On 22.11.2016, the Appellants filed an Appeal to this Court in

respect of the decision by the High Court in OS 102 (“the Appeal”).

[21] Meanwhile, on 8.2.2017, the High Court ordered that the auction for

Lot 458 be held on 14.4.2017, but excluding the completed terraced

factories built thereon i.e. the 25 Units.

[22] On 10.4.2017, the Appellants’ Application in the High Court, for an

Erinford injunction pending the disposal of the Appeal, was dismissed.

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[23] Thereafter, the Appellants filed a similar Application in the Court of

Appeal on 12.4.2017. On 13.4.2017, the Court of Appeal granted the

Appellants’ Application for an Erinford injunction to stay the auction of Lot

24 and Lot 458 pending the outcome of the instant Appeal before us.

OUR DECISION

[24] Upon a perusal of the Appeal Records, and after hearing the

submissions of respective learned Counsels on 17.5.2017, this Court

delivered its decision on 18.5.2017.

[25] By a unanimous decision, we dismissed the Appellants’ Appeal and

affirmed the decision of the High Court. We ordered agreed costs of

RM20,000.00 to the 1st Respondent, and costs of RM10,000.00 to the

2nd Respondent, subject to payment of the Allocator fee. The Deposit is

to be refunded to the Appellants.

GROUNDS FOR DECISION

Issue

[26] The issue before this Court is whether the Charge dated 2.3.2003

registered for the 1st Respondent over the 2 pieces of land held under

Master Titles Geran 29953 for Lot 24 and Geran 32993 for Lot 458 is

valid.

Appellants’ main contention

[27] The Appellants’ main contention is that the Charge registered in

favour of the 1st Respondent was registered by means of an insufficient

or void instrument and/or that the interest was unlawfully acquired. The

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Appellants submitted that at the time of registering the Charge, the 2nd

Respondent had no rights over the 25 Units located in Lot 458 to be

passed to the 1st Respondent.

[28] The Appellants alleged that the 25 Units have been sold to them by

the 2nd Respondent pursuant to the relevant SPAs entered between

them. The Appellants contended that they had paid the full purchase

price for the 25 Units to the 2nd Respondent before the creation of the

Charge to the 1st Respondent.

[29] Furthermore, the 1st Respondent had expressly disclaimed their

rights over the 25 Units. Notwithstanding the UTB Disclaimer, the 2nd

Respondent had charged to the 1st Respondent the entire land in Lot 24

and Lot 458 instead of excluding the land on which the 25 Units are

located by sub-dividing the Lands.

Whether the 1st Respondent has indefeasible rights as a Chargee

[30] The matter of indefeasibility and defeasibility of title is governed by

s.340 of the National Land Code 1965 (“NLC”) which, inter alia, provides

as follows:

“INDEFEASIBILITY OF TITLE AND INTEREST

340. Registration to confer indefeasible title or interest, except in

certain circumstances.

(1) The title or interest of any person or body for the time being

registered as proprietor of any land, or in whose name any

lease, charge or easement is for the time being registered,

shall, subject to the following provisions of this section, be

indefeasible.

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(2) The title or interest of any such person or body shall not

be indefeasible-

(a) in any case of fraud or misrepresentation to which the

person or body, or any agent of the person or body, was

a party or privy; or

(b) where registration was obtained by forgery, or by

means of an insufficient or void instrument; or

(c) where the title or interest was unlawfully acquired by the

person or body in the purported exercise of any power

or authority conferred by any written law.

(3) Where the title or interest of any person or body is defeasible

by reason of any of the circumstances specified in subsection

(2)-

(a) it shall be liable to be set aside in the hands of any

person or body to whom it may subsequently be

transferred; and

(b) any interest subsequently granted thereout shall be

liable to be set aside in the hands of any person or body

in whom it is for the time being vested:

Provided that nothing in this subsection shall affect any title or interest

acquired by any purchaser in good faith and for valuable consideration, or

by any person or body claiming through or under such a purchaser.”.

[31] The learned JC did consider the application of s.340 of the NLC to

the issues in OS 102. Upon a thorough perusal of the said provision, we

are of the considered opinion that pursuant to s.340(1) of the NLC, upon

registration of the Charge by the 2nd Respondent in favour of the 1st

Respondent as chargee, the 1st Respondent is conferred with an

indefeasible interest in the Lands. However, as provided in s.340(2) (a)

or (b) of the NLC, this indefeasible interest of the 1st Respondent shall

not be indefeasible where, inter alia, there is fraud or misrepresentation,

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or where the registration of the Charge was by means of an insufficient

or void instrument, as the case may be.

Whether there is fraud or misrepresentation

[32] In paragraphs 30 and 31 of her Grounds of Judgment dated

25.10.2016 (“GOJ”) (RR Bhgn A dan B Jld 1/11 pg 20 – 50 at pg 35 and

36), the learned JC stated:

“[30] UTB relied on the representation of GPB. And reliance is made

clear in the Charge annexure that GPB as chargor shoulders the

duty of full disclosure and representation under Clause 21.01 (1) of

the Annexure. And GPB never mentioned anything about the sale

or the Disclaimer to UTB. There were no evidence at all to indicate

that even the slightest notice of the sale or Disclaimer ever been

given by GPB to UTB. And again, it was not incumbent upon UTB

to find out what was not reasonable for the Defendant to find out.

How could the UTB be expected to be aware of something he was

not party or privy to?

[31] The disclaimer was issued some 15 years ago (in1999) before the

foreclosure action, and was never in the business of the Defendant

to know or be aware of it. Even if UTB exerted extreme efforts to

ensure the legitimacy of the creation of the Charge, UTB would not

have known of the Disclaimer or the sale as the Disclaimer and the

sale were only within the private knowledge of GPB and the

Plaintiffs. It is utterly preposterous to expect UTB to realize or find

something, when the Defendant does not even reasonably know

what to look for.”.

(Note: in the GOJ, “ “UTB” refers to the 1st Respondent, “GPB”

refers to the 2nd Respondent”, and “Disclaimer” refers to the

Aseambankers Disclaimer).

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[33] The learned JC made a finding that there is no fraud or collusion, or

misrepresentation on the part of the 1st Respondent and/or the 2nd

Respondent. She found no proof at all of any communication between

the 1st Respondent and the 2nd Respondent regarding the

Aseambankers Disclaimer and the SPA, or that the 2nd Respondent had

informed the 1st Respondent of such Disclaimer and the SPA. To quote

her exact words:

“There is a total absence of any proof that UTB has any knowledge

of the sale and Disclaimer at the time the Charge was created and at

the time the OFS and SFD were applied for.”.

(Note: In the GOJ, “OFS” refers to Order for Sale, and “SFD” refers to

Summons for Directions).

[34] We observe that the Aseambankers Disclaimer dated 14.5.1999

was issued 4 years before the Charge was registered in favour of the 1st

Respondent. It is also noted that the Aseambankers’ Charge has been

discharged on 27.12.2007.

[35] Based on the findings of fact of the trial judge, which we accept, we

are satisfied that the learned JC had not erred in ruling that there is no

proof of fraud or collusion, or misrepresentation by the 1st Respondent

and/or the 2nd Respondent in registering the Charge. As such, the 1st

Respondent’s interest under the Charge remains indefeasible.

Whether the registration was obtained by means of an insufficient

or void instrument

[36] The Appellant relied heavily on the 2 Disclaimers, namely the

Aseambankers Disclaimer and the UTB Disclaimer.

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[37] The learned JC stated that she found no proof that the 1st

Respondent knew about the Aseambankers Disclaimer at the time that

the Charge was registered. It is an undisputed fact that the

Aseambankers’ Charge has been discharged on 23.12.2007. Thus, at

the time of registration of the Charge for which the 1st Respondent is the

chargee, it is clear that the Aseambankers Disclaimer no longer has any

relevance on the 1st Respondent’s Charge. Furthermore, as stated by

the learned JC, the Appellants had not lodged any caveat on the Lands

to show their interest thereon. Therefore, there was nothing to prevent

the 1st Respondent from accepting the Charge from the 2nd Respondent.

[38] The UTB Disclaimer only arose after the registration of the Charge.

By way of the UTB Disclaimer letter to CIMB dated 25.8.2004, the 1st

Respondent stated that it had expressly disclaimed all rights, interest and

title to the 25 Units in Lot 24 and Lot 458. The letter, by making reference

to the 25 Units and the Appellants as “Purchaser”, states as follows:

“We undertake to the following without prejudice to our rights over the

remaining property comprised under the Master Title:

(1) to disclaimed (sic) all rights, interest and title to the Property

and exclude the Property from any foreclosure proceedings

commenced or instituted pursuant to our charge;

(2) upon issuance and receipt of the individual title to the

Property to forward to you the individual title together with the

duly executed discharge of charge (“Discharge of Charge”)

affecting the Property PROVIDED that the individual title is

delivered to us and our Charge is still subsisting and that all

cost and solicitors’ fees incidental to the Discharge of Charge

are borne and paid by the persons requesting the Discharge

of Charge”.

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[39] The Appellants submitted that the 1st Respondent recognized that

the 25 Units could not be made the subject of the Charge.

Notwithstanding the same, on 6.2.2014, the 1st Respondent had, by way

of the Foreclosure Proceedings, applied for the Order for Sale to sell all

the Lands under the Charge, including the Disclaimed area and the 25

Units. The Shah Alam High Court had granted such Order on 17.3.2014.

[40] The Appellants relied primarily on s.340(2)(b) of the NLC,

particularly the ground of “insufficient or void instrument”. The Appellants

further relied on the case, Samuel Naik Siang Ting v. Public Bank Bhd

[2015] 6 MLJ 1, where the Federal Court, in citing “Tenure and Land

Dealings in the Malay States” by David SY Wong with approval,

provided a wide and inclusive definition to the phrase “insufficient or void

instrument”. Ramly Ali FCJ at pg 26 stated:

“In ‘Tenure and Land Dealings in the Malay States’ by David SY

Wong, at p 364 the author explained the phrase ‘insufficient or void

instrument’ for the purpose of s 340(2)(b) o the NLC as follows:

(iv) ‘Insufficient or void instrument’

Section 340(2)(b) also provides that a registered title is

defeasible where registration was obtained ‘by means of an

insufficient or void instrument’.

Unlike ‘forgery’, the expression ‘insufficient or void instrument’ is so

wide as to defy comprehensive enumeration of the circumstances in

which a purportedly executed instrument of dealing may be regarded

by the court as ‘insufficient’ or ‘void’. Some general observations may

indicate how wide its domain may be. The reference to the

insufficiency and voidness of an instrument could pertain to all sorts

of circumstances and matters relating to the execution of the

instrument. Where the instrument is executed in pursuance of a

contract of dealing, the invalidity of contract (ie where the contract is

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void) would plainly entail that the instrument is void accordingly. The

instrument may also be ‘insufficient’ or ‘void’ for reasons relating to

the capacity of the parties concerned, or by reason of some formal

defect or irregularity. In addition, non-compliance with relevant

statutory requirement may also result in the instrument being

regarded as ‘insufficient’ or ‘void’.”.

[41] We find that the learned JC did not consider the issue regarding the

UTB Disclaimer. Notwithstanding that, we take note of the fact that the

UTB Disclaimer was only issued on 25.8.2004 i.e after the Charge was

registered on 2.4.2003. Thus, at the point of registration of the Charge

in favour of the 1st Respondent, the UTB Disclaimer did not exist and

therefore had no bearing on such registration to render the registration

as being obtained by means of an insufficient or void instrument.

Therefore, Samuel Naik (supra) does not apply on all fours here.

[42] From the evidence adduced, it is clear that the 1st Respondent’s

interest under the registered Charge has not been rendered defeasible

under s.340(2)(a) and (b) of the NLC.

Whether the Appellants’ rights as alleged bona fide purchaser

supersede the 1st Respondent’s registered rights and indefeasible

rights as registered chargee of the Lands

[43] It is observed that the learned JC had accepted at face value the

Appellants’ allegation that they have paid the full purchase price for the

lands. However, from the Appeal Records we find that nowhere did the

Appellants produce documentary or other cogent evidence during the

Hearing that the Appellants had paid the full purchase price for the

Lands/lots pursuant to the respective SPAs executed between the

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Appellants/Purchasers and the 2nd Respondent/Vendor at the time of

registration of the Charge on 2.4.2003.

[44] In fact, during the Appeal before us, learned Counsel for the

Appellants was unable to show us proof of full payment of the purchase

price by the Appellants for the respective Lots of the Lands, in particular

for Lot 24 and Lot 458.

[45] The only evidence of payment of the full purchase price is a letter

dated 12.8.2004 where the 2nd Respondent wrote to the 1st Respondent

to confirm that the Appellants have paid the full purchase price pursuant

to the SPAs for the 25 Units (CCB Vol 1 pg 1753, and Plaintiffs’ Affidavit

in Support of OS 102 paragraph 27 pg 90 of CCB Vol 2/2). We observe,

however, that the said letter did not give the details of such payment

including the date that the full purchase price was paid by each purchaser

in respect of each of the Lots.

[46] However, from the above letter dated 12.8.2004 issued by the 2nd

Respondent, it is without doubt that as at the date of registration of the

Charge on 2.4.2003, there is no evidence at all that the Appellants had

paid the full purchase price for the Lands to the 2nd Respondent.

Therefore, on 2.4.2003 the Appellants had no title or registrable interest

in the Lands to entitle them to stake a prior or more superior claim to the

Lands over the 1st Respondent’s interest under the registered Charge.

[47] The learned JC had rightly relied on the decision in James Edward

Buxton & Anor v. Supreme Finance (M) Bhd [1992] 1 CLJ (Rep) 129

where at pg 234 the Federal Court held as follows:

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“The issue as to the rights of an innocent purchaser for value, with or

without notice of the charge as against a registered chargee has been

considered by the Courts and is now settled law:……..

In all these cases, it was held that the interest of a registered chargee

is indefeasible by s. 340(1) of the Code unless it is made defeasible

by s. 340(2).

The indefeasibility of the chargee’s interest is not affected by the

chargor’s conduct, however unconscionable or deceitful it may be,

unless it can be shown that there was collusion between the Chargor

and the chargee to defeat the interest of a third party. The interest of

a bona fide purchaser for value cannot prevail over that a registered

chargee.”.

[48] We accept the findings of fact of the learned JC that there is no

proof of fraud and collusion between the 1st Respondent and/or the 2nd

Respondent in the present case. Thus, the interest of the Appellants, as

alleged Purchasers of the Lands, cannot prevail over that of the 1st

Respondent, as registered chargee of the Lands.

Whether the 2nd Respondent has the right to register the Charge in

favour of the 1st Respondent in view of the rights of the Appellants

under the SPAs

[49] As submitted by the learned Counsel for the Liquidator of the 2nd

Respondent, it is a matter of fact that according to all the SPAs entered

between the 2nd Respondent and the Appellants (RR Jld 2/2 pg 234 to

673 and RR Jld 3/2 pg 676 to 1075), Clause 30 of the SPAs clearly

provides for the 2nd Respondent’s right to charge the Lands:

“Clause 30 Right to Charge Property

The Vendor (GPB in this appeal) shall be entitled during the

continuance of the provisions of this Agreement to charge or

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encumber the said Property to any bank, financial institution or

corporation… for purposes of securing any credit facilities”

(emphasis added).

[50] The learned JC had correctly ruled that the 2nd Respondent’s act

in charging the Lands to the 1st Respondent is an act well within the line

of the SPAs since the Appellants’ conduct in entering and executing the

said Agreements had in fact admitted to, agreed with, and acknowledged

the validity of a charge created over the 25 Units even during the

continuance of the SPAs (see paragraphs 37 and 38 of her GOJ at pg

39, RR Jld 1/11).

Whether negligence is a ground to challenge the validity of the

Charge and whether the 1st Respondent was negligent

[51] The learned JC is correct to hold that the 1st Respondent was

never under a duty to ascertain if the Lots were sold off to any third parties

before agreeing to the Charge (see paragraph 45 at pg 25 of her GOJ).

She further stated that “since the Plaintiffs have not bothered to have

their interest reflected in the title and failed to lodge caveats, it is clear

that even if UTB went the extra mile to conduct searches on the Lots, the

Disclaimer and the sale would not have reached the knowledge of UTB

…… This Court also finds that the Plaintiffs have utterly failed to prove

any negligence on the part of UTB.”.

[52] In any case, mere negligence does not constitute fraud (see

Borneo Housing Mortgage Finance Berhad v. Time Engineering

Berhad [1996] 2 CLJ 561, and Lian Keow Sdn Bhd (In Liquidation) &

Anor v. Overseas Credit Finance (M) Sdn Bhd. & Ors [1988] 2 MLJ

449).

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[53] Therefore, mere negligence does not defeat the registered interest

of a chargee under s.340(2) of the NLC.

Whether the 1st Respondent is entitled to proceed with the

Foreclosure Proceedings in view of the UTB Disclaimer

[54] The 1st Respondent contended that they had no knowledge of the

UTB Disclaimer dated 25.8.2004 (even though it is their own Disclaimer).

When the UTB Disclaimer was first brought to their knowledge by the

Appellants, the 1st Respondent, via its Affidavit in Reply in OS 102

affirmed on 18.5.2016 and 24.6.2016 (CCB Vol 2/2 Tab 22 and Tab 26),

informed the High Court that due to the arising circumstances, the 1st

Respondent has decided to undertake an investigation in respect of the

exact location of the allegedly disclaimed industrial lots as well as to

recheck and re-verify all its documents (“Verification Exercise”)(CCB Vol

2/2 Tab 22, pg 143) to determine, inter alia, if the letters of disclaimer

were in fact issued, and how many were issued. In this regard, the 1st

Respondent submitted that it had informed the High Court that it has

carried out various private caveat searches which showed that none of

the Appellants have entered any private caveats on the Lands, and it had

undertaken publications of notices in English, Malay and Chinese, written

to the 2nd Respondent, retrieved a total of 13 disclaimer letters, and had

on 3.5.2016 and 30.5.2016 respectively applied to adjourn the auction for

Lot 24 fixed on 5.5.2016, and for Lot 458 fixed on 21.6.2016 pending the

Verification Exercise, although as chargee of the Master title (s) it has no

obligation to do so.

[55] The 1st Respondent had informed the High Court on 24.6.2016 as

follows:

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“I reiterate paragraph 18 of AIR-D1 which sets out the reason behind

the Verification Exercise and further add that the Letter of

Disclaimer said to be issued by UTB were dated some 12 years

ago. UTB had no intention whatsoever of withholding any

information from this Honourable Court and I verily state that

this was an oversight and not an act of bad faith or dishonesty

on the part of UTB or the deponent. This clearly evidenced by the

subsequent actions taken by UTB.” (emphasis theirs) [see paragraph

18, pg 222, RR Jld 1/11 or at Tab 26 CCB Vol 2/2].

[56] The learned JC found that, as a show of good faith and prudence,

upon having knowledge of the Aseambankers Disclaimer, the 1st

Respondent had issued its own UTB Disclaimer letter, and had carried

out numerous acts which show the 1st Respondent’s “utter good faith in

applying for the OFS and SFD”.

[57] The learned JC rightly relied on the recent Court of Appeal decision

in Rohaya Ali Haidar v. Ambank (M) Bhd [2016] 4 CLJ 563 which held:

“We find that the respondent having made a mistake in not

addressing the interest of this earlier purchasers and the letters of

disclaimers that the respondent has issued cannot now come to court

to set aside the order for sale so as to protect their own shortcomings.

These purchasers rights (if any) are against the respondent (if at

all) based on the letters of disclaimers that the respondent has

issued. That certainly cannot constitute a basis to defeat the

registered interest of the appellant under s.340(1) of the NLC.”

(emphasis added).

[58] We concur with the above view and hold that the 1st Respondent’s

oversight or mistake in not referring to the UTB Disclaimer before

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applying for the Order for Sale in the Foreclosure Proceedings cannot be

the ground to defeat the 1st Respondent’s registered interest under

s.340(1) of the NLC.

[59] The Appellants contended that the 1st Respondent, having

recognised that it did not have the rights over the 25 Units, should not

have proceeded to enforce the Charge by way of the Foreclosure

Proceedings. Instead, the 1st Respondent should first discharge the

Charge, and then create a new charge after subdividing the Lands to

exclude the 25 Units. The Appellants relied on s.241(1)(b) of the NLC

which provides that “the whole, but not a part only, of any undivided share

in alienated land” “may be charged under this Act”.

[60] We note that O.83 r.5 of the ROC provides for the discretion of the

Court to make such Order as it thinks fit when giving dirrections in regard

to the Foreclosure Proceedings:

“5. Foreclosure in redemption action. (O.83.r.5)

Where foreclosure has taken place by reason of the failure of the

plaintiff in a charge action for redemption to redeem, the

defendant in whose favour the foreclosure has taken place may

apply by notice of application for an order for delivery to him of

possession of the charged property, and the Court may make

such order thereon as it thinks fit.”.

[61] It is an undisputed fact that when the 1st Respondent applied for

the Order for Sale on 8.2.2017 in the Foreclosure Proceedings (Annexure

A of 1st Respondent’s written Submissions), the 1st Respondent had

already excluded the built industrial/factory lots erected on Lot 458 from

the auction. At that point in time, it was also clear that none of the 25

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Units are erected on Lot 24. In any case, as submitted by the 1st

Respondent, it is not the pleaded case of the Appellants that the 25 Units

on Lot 458 depend on the sewerage plant in Lot 24 for sewerage

services. The Order for sale for each of Lot 24 and Lot 458 must be

considered on its own merits, without reference to the sewerage service

matter.

[62] The Court in the Foreclosure Proceedings on 8.2.2017 had

deemed it fit to allow the auction of Lot 458, but had excluded the 25

Units from such auction. Thus, notwithstanding the Appellants’

contention as in paragraph [59] above, it is clear that the High Court did

not require the 1st Respondent to discharge the Charge and then register

the Charge afresh by excluding the 25 Units before it allows the Order for

Sale to be proceeded with in the auction.

[63] We note that there is no Appeal filed by the 2nd Respondent

regarding the respective Orders for Sale for Lot 24 and for Lot 458, both

dated 8.2.2017.

[64] In the light of the 2 above Orders for Sale regarding Lot 24 and Lot

458, which clearly do not include the 25 Units, we are of the firm opinion

that the matter in fact has been rendered academic in this Appeal before

us.

[65] We further note that in this OS 102, there is no application to set

aside the 2 Orders for Sale in the Foreclosure Proceedings. Thus, it is

not proper for us to make any Order regarding the 2 said Orders for Sale.

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CONCLUSION

Based on the above considerations, we find no merits in the Appeal.

We do not find any appealable errors in the decision of the High Court

to merit appellate intervention. Accordingly, we dismiss the Appeal and

affirm the decision of the High Court.

Order accordingly. Dated: 19 June 2017 Sgd

(YEOH WEE SIAM) JUDGE

HIGH COURT, MALAYA

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Solicitors for the Appellants Mr. Malik Imtiaz Ms Jamie Wong Mr. Surendra Ananth Mr. Ik Chu Jek Messrs Jamie Wong Solicitors for the 1st Respondent Mr. S. Ramesh Ms Melissa Tai Messrs Adnan Sundra & Low Solicitors for the Liquidator of the 2nd Respondent (In Liquidation) Mr. R.Vinayaga Messrs Skrine